JPMorgan to make pricing reforms

JPMorgan Asset Management (JPMAM) has announced to its shareholders a widespread change to its pricing structure across its UK OEIC range. This historic move will offer transparency, simplicity and consistency across JPMAM’s UK OEIC offering in an industry which has, in recent years, spawned over-complicated charging structures. JPMAM’s steps are consistent with the FSA’s Retail Distribution Review last week and have been planned to be consistent with MiFID. The changes will also allow IFAs to make clearer choices around how they charge for their services. This is JPMAM’s first charging review in over 10 years.

Transparency – from 1st September 2007 JPMAM will fix the other & administrative expenses on its ‘A’ shares, irrespective of the asset class, across its entire UK OEIC range. Currently, these expenses differ widely from fund to fund and from fund house to fund house. They are also set retrospectively and with significant variation. JPMAM is therefore making its total expense policy clearer and simpler to investors and intends to review this policy regularly.

The other & administrative expenses on ‘A’ shares across the entire OEIC range will be fixed at 18 basis points per annum regardless of asset class so investors will have a better idea of total expenses before investing in a fund. This is opposed to the retrospective fixing of these expenses and subsequent confusion for investors as to what is being included in total expenses. The new fixed expenses have been set in line with the current industry average. They are not being taken for certain services such as ‘platform fees’ and are lower than JPMAM’s costs so are therefore below those that could have been set and charged to investors, relative to the rest of the industry. It is believed that JPMAM is the first fund house to announce this kind of transparency in the UK.

The new structure has already been back tested with no material effect on performance so investors will now effectively pay average total expenses for above average performance and service.

Reviewed Initial Charge – The initial charge on most ‘A’ shares is to be reduced from 5.5% to 4.25%, giving JPMAM’s direct investors the ability to access the funds at an average industry cost, whilst those funds with a lower initial charge at present, will remain unchanged.

Greater Choice – JPMAMwill give investors and intermediaries a clear, consistent and uncomplicated pricing structure allowing intermediaries in particular, more choice in how they agree to be remunerated by their clients. This will be achieved by introducing a new range of ‘B’ and ‘C’ shares, giving clients the ability to access the same funds at lower fees depending on the size of their investment. In addition, all existing ‘C’ shares, currently available to some larger investors, are to be re-named as ‘I’ sharesasUK retail investors often have very different requirements to their institutional counterparts. The pricing structure of ‘A’ shares will remain the same - with most having an annual management charge of 1.5% per annum. The new ‘B’ and ‘C’ shares will mainly be priced at 1% and 0.75% per annum respectively.

Regulatory Change

The RDR and MiFID will undoubtedly bring with them widespread changes across the UK investment industry, two of which are likely to be the issue of transparency and that of trailer fees. JPMAM has made the pioneering move to address their clients’ needs now. The OEIC pricing reforms are one example of how committed JPMAM is to delivering the very best, not just in performance, but in value and service terms, to existing and potential clients. JPMAM has more Citywire rated fund managers than any other fund house, 16 four or five star rated funds by Morningstar and more OBSR rated funds than any other UK fund house and has also won Incisive Media’s prestigious Gold Standard for service an unprecedented 4 times running.

Commenting on the reforms, Jasper Berens, Head of UK Sales at JPMorgan Asset Management commented, “Transparency and clarity continue to be major talking points within the financial services industry. We are therefore happy to be heralding these changes now as we are genuinely committed to delivering the very best and fulfilling our clients’ needs in an ever-changing and complex market place, by not only listening to their concerns but by addressing them in a proactive and practical manner.

We see this as benefiting everyone and working in their best interests; the investor, with regards to clarity, simplicity and value; the IFA, with regards to remuneration choice, consistency and clarity and of course, ourselves as the fund provider. We are passionate about improving access to our products and delivering value by offering average expenses with above average performance.”